Contracts

Contracts are legally enforceable agreements between two or more parties to perform obligations resulting from bargained-for exchanges. In most contexts, state laws govern contracts, with each state having jurisdiction- specific rules regarding contract formation and interpretation that have been established by statute and/or judicially created common law decisions. This entry looks at the law regarding contracts and their application in the school setting.

Basic Requirements

In order for contracts to be valid and enforceable, agreements must generally represent a meeting of the minds and intent to be bound objectively manifested by parties with capacity to contract; be supported by valid consideration from each party to be bound; include essential terms that are sufficiently specific and definite to be enforced; be of sufficient form, such as in writing; and have lawful subject matter.

There must be at least two parties to contracts. Parties to contracts must have the capacity to form those agreements. Minors and incapacitated persons, such as those who are incapable of handling their affairs due to mental disorders, generally lack the capacity to enter into contracts. In the education context, the capacity of parties to enter into contracts might be most relevant with respect to agreements between an educational institution and a minor student.

For example, educators in some schools, as motivating tools or behavior management strategies, engage in the practice of asking students to sign contracts specifying the school’s expectations for their behavior. While such strategies might have pedagogical underpinnings, such as teaching students about taking responsibility for their actions, setting clear guidelines and expectations, and others, such “contracts” are, in most instances, unenforceable as legal agreements. These “contracts” are unenforceable because, among other reasons, student parties are minors who are incapable of binding themselves by contracts under law. For this reason, school officials seeking to enter into agreements with students, such as when school boards and their employees seek to be released from liability relating to students’ participation in sports or other extracurricular activities, should ensure that they receive such consent in writing from the students’ parents as well as the students.

Parties with capacity to enter into agreements have done so only when each has given objective manifestations of their intent to do so. Objective manifestations of intent might be signatures on written agreements, handshakes, oral commitments to be bound, or even, under some circumstances, performance of obligations of agreements.

Essential to the formation of contracts is the existence of valid consideration offered by each party. Consideration is something, such as funds, forbearances, performances, or return promises, that each party offers in exchange for the other party’s (or parties’) consideration. Absent consideration, a promise that would otherwise constitute a contract is a mere gift unenforceable under law. Accordingly, with relatively few exceptions, a promise unsupported by valid consideration cannot be a contract.

Valid contracts must include all essential terms and must be sufficiently specific. The omission of essential terms from agreements renders them unenforceable and therefore invalid. Valid contracts must also sufficiently describe their essential terms. Terms are described as sufficiently specific where the adequacy of a party’s performance can be understood when considered in light of such terms. Insofar as contracts with terms that are insufficiently defined cannot be enforced, they cannot be valid.

A common misconception regarding contracts is that to be enforceable they must be in writing. Generally, this is not the case. However, a preference for written agreements has arisen out of the obvious benefit of having such agreements for the benefit of proving the terms of agreements should such proof be necessary at a later date. Many jurisdictions require by statute that agreements for certain kinds of performance, such as for the sale of goods valued over a certain amount, for interests in land, for sureties, and for performance that cannot be completed in a year’s time, be in writing to be enforceable. The last example, contracts that cannot be performed within a year, is of particular importance to school employees, who typically sign contracts several months before the start of academic years.

Valid contracts must also concern legal subject matter. Public policy in favor of the freedom to contract is a respected aspect of American legal thought. This preference for freedom of contract is generally limited only by the boundaries of statutory law, public policy, or common law (judicially decided law). If contracts conflict with statutes, such as by requiring performance that would amount to a criminal act, the agreement lacks legal subject matter and is void as a matter of law even if the parties are unaware of its illegality.

Contracts are commonly referred to as unilateral or bilateral in nature. Bilateral contracts are formed when parties offer their consideration in return for a promise or set of promises. Conversely, unilateral contracts are formed when one party extends an offer to the other that may be accepted by performance rather than by return promises.

School-Related Contracts

Contracts arise in a myriad of ways in the educational context. Perhaps most common are employment contracts between school boards and their employees. Such contracts are often collective bargaining agreements reached following negotiations between boards and the labor unions representing teachers or other staff members. Collective bargaining agreements, otherwise termed labor or collective-labor agreements, often address various aspects of employment including wages, benefits, other employment conditions, employee and employer rights, discipline, and a grievance process.

In the public school context, contracts of employment have been found to confer on the party contracting with the state a property right protected by the Due Process Clause of the Fifth and Fourteenth amendments to the U.S. Constitution. For example, in Cleveland Board of Education v. Loudermill (1985), the U.S. Supreme Court observed that where a public school employee had a contract that created a reasonable expectation of continued employment, the contract amounted to a property interest that the school board could not deprive the employee of without due process of law. Accordingly, the Court explained, a board cannot constitutionally discharge such employees without first affording the employee the basic requirements of due process: notice and the opportunity to respond to the charges before the deprivation of the property interest.

Contracts also arise in the school context in much the same way that they arise in other contexts. Schools enter into contractual agreements relating to a wide variety of pursuits, including construction and building maintenance, the provision of special education services, the purchase of products such as textbooks, and other goods and services.